Recent IRS Regulations May Limit Family Entity As Estate Planning Tool

Recently proposed regulations under Section 2704 of the Internal Revenue Code may curtail a powerful estate planning technique.  If finalized in their proposed form, the regulations would limit the use of valuation discounts for ownership stakes in closely-held businesses, including LLCs, partnerships, and corporations.  Currently, discounts for minority ownership in closely-held entities are allowed to account for the difficulty of selling certain stakes that are subject to restrictions.  This means that an entity could be valued at a discount for estate planning purposes.

The effective date is uncertain, but could be as early as January 2017.  If you are contemplating transferring an interest in a partnership, LLC or corporation to family members, please contact Dede Martin or Michelle Lewis Salzman.  Planning options should be considered before the likely effective date of the new regulations.

~Submitted by D. Martin and M. Salzman